During your working years, you probably followed your credit score closely when you needed a new car or home loan. As you near or enter retirement, the reasons to maintain good credit, while surprising for some, are still incredibly important. In fact, there are still many factors to consider when it comes to your credit in your retirement years.
Reasons to Maintain Your Credit Score
- Downsize your home or move. Maybe you’ve decided you want to move, or you just want to save money and downsize to a smaller home? Whatever the reason may be, you’ll likely need to take out a loan to buy your new home. And if you want the lowest rate possible, you’ll need to have a good credit score and positive history.
- Plan for the unexpected. Should a sudden medical emergency occur or home repair be needed, you’ll need reassurance that you can get a loan to help with financing. With a good credit score, you’ll get approval for extra funds at a prime rate.
- Take on a part-time job. When in retirement, you may want to re-enter the workforce with a part-time job or even start a new business. Your credit could contribute to your future employment or ownership goals, as your credit report will likely be reviewed by employers and small business lenders prior to hiring you or approving your new business loan.
- Enter assisted living or elderly home care. At some point, you may move into an assisted living facility or nursing home for proper care and medical treatment. The cost of these facilities can be expensive, especially for long-term stays where Medicare isn’t accepted.1 For this reason, directors of the facility want to ensure payments will be made on time, and they may refer to your credit report.
- Get a good credit card. With a good credit score, you’ll be approved for some of the best credit cards. If traveling is on your bucket list, the right rewards credit card could help you earn money toward a trip or even save on travel expenses.
What Can Be Done to Help Boost Your Score?
- Review your credit report and fix any errors. Every year, you’re able to request a free credit report from each of the three major credit bureaus: TransUnion, Equifax, and Experian. Review the information thoroughly to make sure what is shown is current and up to date. Report any inaccuracies to the credit bureau from which the report was pulled. Instructions for doing so will be included with your report.
- Consider freezing your credit. Freezing your credit is a preventative measure you can take to keep thieves from establishing new credit accounts under your name. When your credit is frozen, no one can access your credit data without your special PIN or password, that allow access to proceed with a credit check.4
- Pay off credit card balances. Credit utilization, or the percentage of available credit that has been borrowed, accounts for 30 percent of your total credit score.5 Try to reduce your credit card balance and your score will improve drastically. Only make purchases you know you can pay back and aim to pay more than the minimum to reduce your interest and pay your balance off faster.
- Take care of overdue bills. If you have any delinquent accounts, clean them up and pay back the full amount, even if it takes you a while to do so.
- Make your payments on time. Whether it’s a loan payment or a phone bill, missing a payment can affect your credit score. In fact, payment history is the largest factor used to determine your credit score.5 Create a payment schedule, or better yet, take advantage of tools through Online Banking or a mobile app to set up account alerts and reminders, automatic payments, and utilize money management
- Keep old credit card accounts open. If you have a credit card that’s been sitting around, it’s okay to keep it open. In fact, it’s recommended to keep it open. When your credit score is calculated, credit bureaus factor in the length of time an account is active. So, use it to your advantage and let longevity raise your score. Keep in mind, although there is no standard inactivity time limit, your credit card could be canceled after six months, one year, two years or more – it all depends on the card issuer.6
Why You May Not Have a Credit Score
If you decide to use cash instead of credit, there’s a chance you may not have enough credit history to support your financing needs in your retirement years. Credit reported to the major credit bureaus expires after seven years; therefore, if you have any accounts older than seven years from the first date of delinquency, it’s likely to drop off your credit report.2
If you believe this applies to you, it’s okay – it’s never too late to build new credit. Just keep in mind you need one active account for six months to build enough history to generate a new score.3
While retirement is a time for relaxation, a good credit score will continue to be crucial well-after your working years. With a good score, you’ll have greater flexibility and security to accomplish whatever retirement goals you may have or needs that may arise.
Interested in knowing your score? If you’re a GECU member and you have a: car, boat, RV or motorcycle loan; credit card; personal loan; home loan; home equity loan; or a Simply Free, Choice, or Amplified High-Yield checking account, you can access your FICO® Score (updated quarterly) for free within Online Banking and our mobile app.
- Tips for Dealing with a Bad Credit Report
- Don’t Be Frozen Out – Know How and When to Thaw Your Credit
- What Doesn’t Affect Your Credit Score
- Calculator: How Soon Can I Eliminate My Debts?
1 Elder Law Answers Medicare’s Limited Nursing Home Coverage
2 Bankrate When Does Old Debt Fall Off Credit Report?
3 The Balance Why Don’t I Have A Credit Score?
4 LifeLock How to Freeze Your Credit
5 Credit Cards FICO’s 5 Factors: The Components of a Credit Score
6 The Balance Your Credit Card Account Could Be Closed to Inactivity
FICO is a registered trademark of Fair Isaac Corporation in the United States and other countries. General Electric Credit Union and Fair Isaac are not credit repair organizations as defined under federal or state law, including the Credit Repair Organizations Act. General Electric Credit Union and Fair Isaac do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating.